The 2017 Tax Cut and Jobs act is undoubtedly the most significant piece of tax legislation in recent history. Its scheduled expiration – in 2026 – is fast approaching, and how we vote in November will directly affect what happens to it.
On the one hand, President Trump – under whose administration the bill initially passed – has proposed extending the TCJA, and promised tax cuts for all. In a rally in May 2024, he said, “I’ll give you a Trump middle class, upper class, lower class, business class big tax cut.” The 2017 TCJA was certainly just that, and its extension would fulfill that promise.
On the other hand, President Biden tweeted in May 2024, “That tax cut [the TCJA] is going to expire. If I’m reelected, it’s going to stay expired.” Although this statement has since been walked back – there would be no tax hike for those earning less than $400,000 – the sentiment remains: hiking taxes is fair game for the Biden administration.
The 2017 TCJA doubled the standard deduction, making it the default deduction for 90% of Americans and significantly increasing the amount of income that doesn’t get taxed at all; it also doubled the Child Tax Credit and extended it to more families. Through its adjustment of tax brackets, the marriage penalty was lessened, and marginal tax rates dropped. For businesses, the TCJA allowed for full deduction of depreciating assets (though this has already begun to expire), amongst other changes to what deductions could be made.
At the heart of the debate surrounding the TCJA is the question, “what do we do about the deficit?”. After all, there are all sorts of scary statistics about how we spend more on our debt interest payments than our national security. Surely this isn’t the time to reduce our revenues by cutting taxes? Well, perhaps it is. Lower taxes encourages growth and generates more income, more sales and more industry that can be taxed. There’s also always the option to spend less…
In reality, although President Biden claims that he would allow the TCJA to expire, and although President Trump claims that he wouldn’t, changes are coming to the federal tax code. Both candidates will seize the opportunity to rewrite the tax code to suit their political aims. President Biden insists that if the wealthy and the corporations would just pay their fair share, our budgeting issues would melt away. This is nonsense, of course, since the wealthy do pay their fair share and since our budgeting issues have more to do with our spending than our revenues. He would use the Presidency to raise tax rates for the wealthy, and possibly to tax capital gains as regular income. President Trump simply wants to perpetuate a policy that – although arguably the crowning domestic achievement of his presidency – still has its issues. What is clear is that voting taxpayers must equally seize the opportunity to choose who writes the tax code.